Unemployment Rate Rises to 5.4 Percent

By ROBERT D. HERSHEY Jr., Special to The New York Times

Published: May 5, 1990

WASHINGTON, May 4—
The Labor Department reported today that the unemployment rate rose two-tenths of a point last month, to 5.4 percent, its highest level in more than a year, blunting fears of accelerated inflation and higher interest rates.

The latest data, which provided the first comprehensive view of economic performance in April, followed several recent reports indicating that both the economic pace and the inflation rate had quickened. The general reaction of economic analysts to today's figures was relief that the economy was in no near-term danger of overheating, thereby appearing to rule out any chance of a near-term tightening of monetary policy by the Federal Reserve.

The bond market soared on what was clearly good news for it, while the stock market posted a modest advance as it weighed the benefit of lower interest rates against the possibility that a slack economy would cause more erosion in corporate profits.

There were sobering elements in today's report, including a decline in the number of jobs when temporary census workers were excluded and the 12th fall in the number of factory jobs in the last 13 months. But the figures did not revive serious fears of recession.

No Sign of a Slump

''I don't see any sign that the economy has slumped,'' declared Richard D. Rippe, a senior economist at Dean Witter Reynolds.

In interpreting the data before the Joint Economic Committee of Congress, Commissioner of Labor Statistics Janet L. Norwood said that while the job market was weak last month, the rise in the unemployment rate did not signal any fundamental change.

For one thing, she said, ''the April jobless rate follows a down tick in March and remains very close to the rate that has prevailed over the last year and a half.'' For another, she added, ''thus far we can discern no meaningful change in the measures that might signal a deteriorating unemployment situation.''

Dr. Norwood also said there was no rise in either the number of newly unemployed - those out of work for less than five weeks - or the number of people who lost their last jobs.

Scant Increase in Jobs

Probably the most startling figure in today's report was the scant rise of 64,000 jobs in nonfarm sectors, far below estimates that centered on about 375,000 and went to well above 400,000.

Those making the projections may have underestimated the degree to which hefty job gains in January and February, when relatively warm weather aided construction, borrowed strength from succeeding months. Construction jobs fell 99,000 last month after seasonal adjustment, showing the effects of a dearth of winter layoffs.

It also appeared that economists had expected too many new jobs from hiring by the Census Bureau.

Dr. Norwood may have caused some confusion when she said last month that more than 200,000 census takers were expected to ''be added in April.'' But she was referring to the cumulative total of monthly hiring of 22,000 in January, 5,000 in February, 90,000 in March and 78,000 in April - a total of 195,000 spread over four months.

Factory Jobs Fall Again

Factory jobs fell another 22,000 last month, with the weakness concentrated in durable goods, particularly machinery, the department said. Although output has been maintained, manufacturing remained clearly in the doldrums. Nevertheless, the ranks of production workers in factory jobs showed a small increase last month. Samuel D. Kahan, an economist at Fuji Securities Inc. in Chicago, said this implied the cutbacks were in support staff, a further sign that American industry has become leaner and more competitive.

Factory jobs have declined by 280,000 since March 1989, the report showed. Last month 46.5 percent of 141 manufacturing industries added to payrolls, up from 44 percent in March but down from 49.3 percent in February.

Over all, gains in service jobs were modest except in Government, which added about 50,000 positions, not including the 78,000 at the Census Bureau. Health services added 46,000 jobs and retail trade increased by 24,000 jobs. The total of 179,000 new service jobs was partly offset by a decline of 115,000 in goods-producing jobs to achieve the net advance of 64,000.

Modest Rise in Payroll Earnings

The length of the average work week in the private sector was unchanged, but the factory work week declined by 12 minutes, to 40.6 hours, and factory overtime fell by the same amount.

There were still other factors in today's report that helped prevent worry about an economic decline. One was an upward revision in jobs for March to a gain of 103,000 instead of the 26,000 increase initially reported.

Another was the disclosure that both hourly and weekly payroll earnings rose a modest three-tenths of 1 percent in April, slightly less than in March, despite a rise in the minimum wage that took effect at the beginning of the month. This was regarded as likely to reassure the Federal Reserve that wages are not producing worrisome inflation pressures that need to be quickly countered.

The survey of households, on which the overall unemployment rate of 6.8 million was based, showed a decline of 218,000 in civilian jobs and a 57,000 rise in the labor force, a combination that raised the ranks of the jobless by 275,000.

At 5.4 percent, the jobless rate is at the highest level since January 1989, and the April increase was the first change of more than one-tenth of a point - enough to be considered statistically significant - since a three-tenths increase, to 5.3 percent, in April 1989.

Nationally, the overall jobless rate. which includes people in the military, also rose two-tenths of a point last month, to 5.3 percent.